RBC warns of Palantir's problems, expects shares to fall 70%. Is it worth selling?

RBC advised selling shares in civilian and military AI systems developer Palantir and reiterated its prediction that they would fall more than threefold. The investment bank pointed to the decrease in the number of contracts of the AI developer, as well as their value. At the same time, Palantir shares are very expensive, and only very good reporting in early February will be able to justify it, the analyst believes.

RBC Capital Markets warns that the risks of overvaluation of shares of AI developer Palantir Technologies and the slowdown in the company's fundamentals could lead to a significant decline in quotations, writes CNBC. Rishi Jaluria, an analyst at the investment bank, reiterated an Underperform rating on Palantir's shares, which is tantamount to an advice to sell the securities. He also kept their target price at $50, which is 70% below the closing price of trades on January 27.

Palantir shares have already lost more than 20% over the past two months. And at trading on Wednesday, they were down another more than 4% to $158.4.

RBC's main argument is government contracting data, which shows that both Qualified Contract Value and Net Annual Contract Value are declining, Barchart writes. This means that not only does Palantir now have fewer late-stage deals in the pipeline, but revenue growth may be lower than expected, CNBC explains.

The situation on the commercial side is not optimistic either, according to Jaluria. Recent RBC checks show that at least some customers are reconsidering their long-term engagement with the Palantir ecosystem, the analyst wrote in a Barchart statement.

Jaluria notes that the ratio of share price to projected earnings (P/E multiple) exceeds 200, making Palantir's securities among the most expensive among AI companies. He also points out that company insiders have mostly sold shares in the last six months, which could be a signal to investors that the securities are overvalued.

"We can't find a reasonable explanation for why Palantir is the most expensive company in our coverage of the software sector. Unless the company shows a quarter with significantly above expectations and an improved outlook that confirms accelerating near-term growth, this valuation seems unsustainable," CNBC quoted Jaluria as saying.

- On Jan. 15, Wedbush analyst Dan Ives, popular among retail investors and one of the most prominent tech optimists on Wall Street, named Palantir as one of the key AI bets for 2026.

- On January 13, Citi Research analyst Tyler Radke upgraded Palantir from Neutral to Buy and raised his target price for the company's securities from $210 to $235.

- On January 6, investment firm Truist Securities initiated coverage on shares of Palantir with a "buy" recommendation and $223 target price.

Most of the 30 analysts tracking the AI developer's securities take a neutral stance: the securities have 17 Hold ratings, MarketWatch shows. Another nine recommend buying the stock, and four recommend selling. Wall Street disagrees with RBC: the analysts' consensus target price of $192.9 implies the stock is up 16.4% from the last closing price.

This article was AI-translated and verified by a human editor